It has been more than three decades since the enactment of the law that regulates the Fideicomiso. The Fideicomiso, in general terms, is the legal act whereby a settlor transfers assets to a fiduciary (trustee). The trustee in turn agrees to manage those assets according to the provisions established in the Fideicomiso instrument (trust), for the benefit of a beneficiary, which could be the settlor itself.
Law 21 of May 2017 was enacted with the purpose of implementing new boundaries and reinforcing the previous regulations that applied to fiduciary companies and to the trust in general (Law 21). It comprises three different features. These revolve around the adoption of new regulatory guidelines pertaining to the fiduciary business, the amendment of Law 1 of 1984 (Law of Fideicomiso), and the modification of several laws containing provisions that regulate certain aspects thereto.
Regarding the regulatory matters contained in Law 21, perhaps the most important consists of the express limitation of the fiduciary business to holders of a fiduciary licence issued by the Superintendence of Banks. These changes preclude unauthorised persons from acting as trustees. The latter was a permitted practice before the enactment of Law 21 so long as it could have been reasonably construed that the unauthorised persons were not carrying out the fiduciary business in a 'customary' manner.
In addition, Law 21 establishes a wide array of provisions that aim to increase professionalism levels in order to safeguard and preserve the assets of the trust. It is worth mentioning that the provisions include a requirement to pay a regulatory fee. They also adopt formal mechanisms of reorganisation and liquidation of fiduciary companies, along with a special process relating to unclaimed assets.
As for contractual matters concerning the trust, several amendments were made to the Law of Fideicomiso. The modifications essentially seek to protect the settlors and beneficiaries by attempting to mitigate potential moral hazard risks that may arise from situations associated with conflicts of interest.
Law 21 also sets forth provisions that modify the anti-money laundering/combating the financing of terrorism law to bolster Panama's commitment to tackle the misuse of fiduciary services. It also incorporates certain provisions which improve the tax treatment of trusts, in order to foster the structuring of trusts for real estate financing.
Overall, Law 21 aims to enhance Panama's financial services through the addition of attractive tax features, higher professional standards, and tougher sanctions.
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